CG65952 | Losses: loans to traders: irrecoverability: borrower continues to trade

There may, exceptionally, be no reasonable prospect of recovery of a loan even though the borrower continues to trade. Any judgement as to whether there was any reasonable prospect of recovery will depend on the precise circumstances of each case. In marginal cases, it will be necessary to obtain details of any judgements which were made concerning the borrower's future prospects, at or about the time the loan is claimed to have become irrecoverable. You will also need to form an opinion on the factual basis for those judgements, and you may need to consider carefully the circumstantial evidence including all available documentation such as material presented to bankers or other investors, and, in the case of companies, relevant directors' reports.

Any judgement as to the prospects of recovery of a loan should be made on the basis of the facts as they stood at the time when the loan is claimed to have become irrecoverable. Although the balance sheet of the borrower as at the date of claim is unlikely, in itself, to be an adequate basis for accepting a claim, such a balance sheet may be taken into account in coming to an overall view of the position at that date. Regardless of when the accounts were actually produced, the balance sheet will give a snapshot of the company's affairs at that date. Accordingly, consideration of such a balance sheet is not using hindsight to form a view as to the acceptability of the claim.